Despite the increase in property prices and a stabilization in the housing market, many experts say that the foreclosure crisis is far from over. However, buying a foreclosed home is different from buying a typical resale.
In many cases:
A real estate agent is involved.
The seller wants a letter of pre-approval from a lender before accepting an offer.
There are few, if any, room for negotiation.
The house comes as is, and it is up to the buyer to pay for repairs.
On the positive side, most banks owned homes are vacant, which can speed up the process in motion.
“Buying a foreclosure is certainly a bit of a rut. It’s not easy,” says Robert Jensen, agent, and president Rob Jensen Co. in Las Vegas. “Get the great prices, but sometimes passed by a large number of houses and writes many offers to get the home you want. ”
1. Get a real estate broker and a lender
The first 2 stages of buying a foreclosure should happen almost simultaneously: Find a real estate broker who works directly with banks that have homes and obtain prior approval from a lender.
Elaine Zimmerman, the real estate investor, and author, recommends that buyers first visit a site with a database of foreclosed homes. You can also see a local real estate website that allows you to filter results to see only foreclosures. You can find acronym REO means “real estate” (by a bank, that is). This means that the house was in foreclosure and the lender is selling.
2. Getting a broker on your side
The goal of combing through foreclosure listings is not to find a home; it is to find an agent. Banks usually hire one or a few realtors to manage their REO properties in a market. In many cases, the buyer works directly with the broker instead of using a buyer’s agent bank. Thus, the Commission does not have to be divided between two runners.
“A lot of these real estate agents have a long-term relationship with these banks, and know of ads that have not even come on the list,” says Zimmerman. “Call them in ads that interest you, but also will ask questions about the ads that start arriving, because sometimes it can take one or two days or even a week before a list is actually in the database “.
Such application may not always develop. In places where thousands of seized goods are on sale, you might not get much more attention, one-on-one overloaded agents. To prove you’re serious about buying, says Jensen, “just before or after meeting with the agent, meet the lender.”
3. Get a pre-approval letter
Unless you plan to pay cash, a recent letter of pre-approval from a lender you are required. The letter describes the amount of money you can borrow, based on the evaluation by the lender of your credit score and income.
“The problem is that buyers want to get home first, and then think they will work on funding,” says Jensen “But the problem is that very good deals on these banks belong, they will quickly -. And the buyer does not necessarily have the time to try to reach the funding later, they have to work as the first. ”
Couple discussing buying a house with a potential agent in the background | Hero Images / Getty Images
Zimmerman says some first-time buyers make the mistake of assuming that the bank sells the house also finance the mortgage as part of the transaction. “Do not expect to obtain bank funds awarded,” she said. “This is a totally independent operation and it looks that way. People in the department of REO (bank) are not loan officers. They get rid of bad assets”.
4. The price depends on sales pace
There is no general rule about what the bank’s net profit is the price. As with any real estate purchase, you should look at recent sales prices of comparable properties, or “comps.”
Jensen said: “I really look at the current compositions in current market conditions and write a competitive offer based on that sometimes banks price actually under the houses, and the house will have multiple offers on list price within hours .. sometimes it is too high, and that can come in casualties many times, buyers will come to me and say .. “we write offered at half price just does not work that way.”
5. Do not expect a discount repair
Note that foreclosures homes are usually sold in the state. This means you should not expect to get a discount to compensate for repairs. Jensen said: “Let’s say the local listed for $ 200,000, all compositions are $ 200,000, and the customer comes and says,” Hey, look, I want to buy this house, but I have to paint, carpet and correct the damage mold, so I want to make $ 15,000 in price. Know what? Everyone else was in the same state and sold for $ 200,000. ”
Jensen also advises looking at the “absorption rate class products.” This means that you have to know what comparable homes are sold quickly. In foreclosure, a house of 3,500 square feet with a pool in a gated community could sell in days or hours, while more modest homes could stay on the market for weeks. Or vice versa, depending on market conditions.
If houses in-class products are selling quickly, “the best advice on property owned by a bank is reaching its highest and best unless the property has been sitting on the market forever, no activity” Jensen says. “If you’re going to be angry because you spent $ 5,000 more, but has lost the property, only a higher price offer in the first place.”
Find ASAP traders
Because repairs are almost inevitable with foreclosed homes, Jensen and Zimmerman recommend meet traders who can assess and repair damage from pests, mold, and leaks. Zimmerman says you should assume that the air conditioning needs to be fixed, and possibly the heating system, too.